Compensation Elements
Variable pay
Also called: incentive pay, at-risk pay, performance pay
Any compensation that varies based on performance — typically bonuses, commissions, and equity grants.
Variable pay is the umbrella term for compensation that isn't guaranteed. Unlike base salary, variable pay only pays out when performance conditions are met. It includes:
- Annual bonus / STI — pays based on company and individual annual results
- Sales commission — pays based on bookings or revenue closed
- Spot bonuses — discretionary recognition payments
- Equity grants / LTI — vest over time and pay value based on stock performance
- Profit-sharing — pays a percentage of company profits
Variable-pay leverage (the ratio of variable to total pay) is highest in sales (often 50/50 base/variable) and executive roles (often 40/60 base/variable). It's lowest in operations and individual-contributor roles where pay is mostly fixed.